Travel: When to Save and When To Splurge

It was two years ago when I woke up drenched in sweat inside a Palm Springs hotel room. The temperature outside was a whopping 118 degrees.

And while the air conditioning unit in my room read 60 degrees, I knew it was closer to 90. Cue the “I'm melting" scene from "The Wizard of Oz."

This wasn't what I had in mind when I booked a Southern California vacation with my husband Tyler. Then again, it was August and room rates were low for a reason. We'd pre-paid at $150 a night and still had one night to go. But all we could think about was stepping into an ice chest and we decided to make a change. We bolted.

We ate the $150 (“a sunk cost" as Tyler the accountant would say), and hopped in our car. We weren't on a specific budget for the trip, but we didn't want to go crazy and spend a king's ransom. We didn't know where we were going, though we did know we wanted to be close to the beach. So we drove west until we hit Los Angeles, and a few hours later we were checking into a nice hotel in West Hollywood.

This splurge paid off. We ended up getting free tickets to a comedy show from the new hotel's concierge and had fun eating a cheap dinner and enjoying laughs during Pauly Shore's standup routine.

But this experience raises the question: When should you save on vacation, and when should you splurge? I've traveled on a budget most of my life—including a year backpacking across Asia—and learned many things from my adventures.

Here are four questions you can ask yourself when approaching a save versus splurge situation—especially if you're traveling with limited funds:

Question #1: Can you do it at home?

You read a few great reviews about a Mexican restaurant in the city where you're traveling and can't wait to go. You look at the menu and entrees are around $15-$30 per person, not including drinks. Should you go?

No. Chances are, you've already eaten at an amazing Mexican place before. You'll have many choices where you can eat when you're traveling, so choose cheap when it comes to food. Better yet, go to the grocery store and cook at your hostel or in your room.

Question #2: Are there cheaper options for transportation?

You're backpacking through Europe and want to get from Amsterdam to Paris in a few days. Eurail is pretty pricey and you've always wanted to try train travel, but a budget airline can get you there for $40USD. In this case, go with the cheaper option.

But before going cheap, make sure the option you choose is safe. I vividly remember looking for a plane ticket to Kathmandu, Nepal, from Bangkok, Thailand, back in 2008. International air carriers were quoting rates in the thousands, while one local carrier offered the same trip at around $300. The catch was that I had to go to an office in Thailand and pay in cash. It wasn't until after landing safely in Nepal (thank goodness), that I did research on the airline and learned of their terrifying record of crashes in the Himalayas. Lesson learned: in that scenario, it would have been better to splurge.

Question #3: Is timing an issue?

Not everyone has a year (or even a month) to travel. If you're short on time, splurging may be more important to you. In the case of my aforementioned visit to Palm Springs, our trip was on a short timeline. This made it a necessity to maximize every day of the trip and when money wasn't as big of an issue, it felt appropriate to splurge on a location that wasn't as uncomfortably warm as Palm Springs in the summer.

Question #4: Is this a once-in-a-lifetime opportunity?

In 2009, I had the opportunity go ice climbing in New Zealand. This was at the end of my yearlong trip through Asia, and my bank account was running on fumes. At the same time, I knew that I'd never get another chance to climb the Franz Josef Glacier with crampons on. For that reason alone, I handed over $200 and went on the excursion. It was worth every penny.

As long as you don't do a pricey excursion every single day of your trip, you're sure to have enough money left over when you come home. Save on everyday expenses like lodging and food—and splurge on experiences.

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